Is the SEC Marketing Rule creating a growth bottleneck for RIAs?

Is the SEC Marketing Rule creating a growth bottleneck for RIAs?

The SEC Marketing Rule modernizes regulations for investment advisors regarding advertisements, client testimonials, and endorsements. As content volume grows, however, many firms say they are hitting bottlenecks on review, disclosures and recordkeeping when it comes to all that material.

Neal Albritton, lead advisor and owner of Albritton Financial Services, believes the biggest friction when it comes to marketing compliance isn't in the process itself, but in the interpretation.

“What one advisor sees as compliant, compliance may view differently, and we're all watching peers do it both ways. Thankfully, we lean heavily on Integrated Partners to help us understand the risk profile of each approach so we can move forward confidently,” Albritton said.

He adds that he treats compliance much like his own in-house legal team. In his view, their role is to tell him what the risk is, not to kill creativity. By staying aligned on objectives early and collaborating on strategy, Albritton believes he’s been able to “maintain his voice” and client experience without stepping out of bounds.

Rick Ohlrich, chief compliance officer at RFG Advisory, meanwhile, says he repeatedly hears from advisors joining his platform that approvals used to be their biggest friction point. What he often sees is advisors operating within a system of compliance policies that are more driven by the firm than by the actual SEC Marketing Rule. In hybrid environments, for example, he says firm-level interpretations of SEC & FINRA rules often influence how advisory marketing is governed, resulting in one size fits all oversight that doesn’t apply to an advisor’s niche, client needs or client demographics.

“It’s important for advisors to understand how regulations apply to their unique business rather than defaulting to overly broad restrictions. Our approvals approach is tailored to the realities of each advisor’s practice, not one-size-fits-all oversight. And we take the time to explain how the rules impact the proposed marketing and provide alternatives where changes are necessary,” Ohlrich said.

The most important system and process consideration, according to Ohlrich, is an integrated compliance and marketing ecosystem. If firms are still operating in fragmented systems where compliance and marketing teams are not speaking to each other, they’re missing a meaningful opportunity.

Stressed Ohlrich: “When compliance training, resources and consultation are baked directly into the marketing engine, marketing can move efficiently without waiting days for approvals or increasing risk, each team understands the other's expectations and needs.”

Samuel Diarbakerly, founder & private wealth advisor at Generation Capital Advisors, does not view the SEC Marketing Rule as a growth bottleneck. In his opinion, the SEC exists to protect investors and, by necessity, regulates to the lowest common denominator.

“Compliance can feel like a bottleneck when firms operate in gray areas. We prefer to live in black and white. We also intentionally stay away from testimonials, as we work with private clients who value confidentiality. When friction does appear, it’s typically around interpretation rather than the rule itself as content volume increases,” Diarbakerly said.

ABOUT THAT GRAY AREA

When it comes to the SEC Marketing Rule, Albritton says testimonials are the gray area he’s chosen to avoid entirely because in his opinion “the regulatory risk just isn't worth it.” Instead, he works with compliance to build client avatars that showcase real experiences in composite form, letting him tell authentic stories without crossing the line into solicitation or disclosure traps.

RFG’s Ohlrich, meanwhile, has found marketing around financial planning concepts particularly devilish.

“Agonizing over the presentation of the time value of money as inferring hypothetical performance or whether discussing the characteristics of a back door Roth strategy constitutes a recommendation can leave a firm paralyzed. Not to mention where, with what prominence and at what grade level disclosure needs to be provided can make a piece unintelligible,” Ohlrich said.

Instead, he prefers to keep things simple by not trying to pack so much into a piece that the reader becomes overwhelmed.

“We think about generating a series of concise, specific marketing pieces versus a giant white paper catch all,” Ohlrich said.

Finally, Generation Capital’s Diarbakerly says alternatives remain an area to keep an eye on because the products are often misunderstood, and the risks are not always clearly disclosed.

“The days of a wholesaler paying for a rubber-steak dinner are over. If you lead with planning, benchmark investment strategies appropriately, and consistently do the right thing, the current regulatory environment should not hinder growth. In many ways, it reinforces better behavior for both advisors and investors,” Diarbakerly said.